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Thursday, January 19, 2012

In the Best Interests of the Government

The following article, by your blogger, was published in the Guam Business Magazine, Vol. 28, January/February 2012.

In the Best Interests of the Government
The law considers and construes the “best interests” of the government in a variety of contexts, not just procurement law. But, in procurement law generally and Guam particularly, it is not only a broad consideration invoked by courts to defer to sovereign rights, but also is used as a specific condition of law that must be satisfied before certain actions are taken. Certain things are allowed to be done only when in” the best interests of the Territory”.

But isn’t “best interest”, like beauty, in the eye of the beholder? What is meant by it, who determines it, and by what standard, if any? We will explore those questions by looking at some of the instances in which it is used and possibly misused.

By my search, the term “best interest” of the government is used eight times in the whole Procurement Act, thirty-one times in the Regulations. One instance is when the government issues an IFB (or RFP) and then decides to cancel the solicitation. § 5225 of the law allows a solicitation to be cancelled (or all bids to be rejected) only “when it is in the best interests of the Territory in accordance with regulations”. The regulations elaborate the law, with specific reasons for cancellation all premised on a determination, in writing, from the highest procurement authority, that the cancellation “is in the Territory’s best interest”.

A recent Public Auditor’s decision dealt with that situation. The appeal of Joeten Development, Inc. involved an IFB by the Department of Revenue and Taxation for a lease of office space. After bids were solicited and opened, publicly disclosing Joeten’s bid, DRT decided to cancel the bid. DRT claimed it didn’t have sufficient funds to pay the bid price and would later issue a new bid. (In my experience, this is not an isolated practice, and is indeed quite frustrating and troubling.)

On review by the Public Auditor, she held “it was not in the public's interest to cancel the IFB due to insufficient funding.” She analyzed the Departments budget, the amount it was already paying for rent, dismissed DRT’s claim of insufficient funding, and concluded DRT would recognize substantial savings by awarding the contract to Joeten.

Thus we see that DRT (and in this case GSA’s Chief Procurement Officer) made the determination of the government’s “best interests”, in the first instance. But, the Public Auditor did not take DRT’s word for that. She independently scrutinized the situation to see if there were any facts supporting or negating any such conclusion, and came to her own determination that the protestor’s bid was in the Territory’s best interest. How DRT reached its decision is anybody’s guess.

The Public Auditor is given a special power of review, called de novo review, which allows her to disregard the agency determination. Her standard of review allows her to cast her own judgment of what is the Territory’s best interest.

The Public Auditor’s standard of review is broader than the traditional standard of review exercised by courts. There are a number of names to describe the court standard of review (e.g., “substantial evidence rule”) in , all reflecting judicial deference to the agency decision, but the result typically applied in practice is to accept an agency determination unless it is “clearly erroneous, arbitrary, capricious or contrary to law”.

Guam courts use the “clearly erroneous” standard when reviewing all agency determinations. But the Guam procurement law suggests they should not be so deferential to agency determinations in all procurement cases, and the determination of “best interest” in the bid cancellation situation is one of those cases.

§ 5245 of the Guam procurement law is specific about which determinations in procurement law are subject to the deferential “clearly erroneous” standard, and, by implication, which are not. That statute specifies eleven other statutes in the procurement law that are subject to the “clearly erroneous” standard of review.

The statute dealing with cancellation of bids, § 5225, is not on that list. Presumably, a court reviewing whether an agency’s determination that cancellation of a solicitation is in the Territory’s best interest would apply greater scrutiny of the underlying reasons and justifications than the “clearly erroneous” standard would allow.

It is noted that other procurement statutes containing “best interest” conditions are on the list, so a review of an agency’s best interest determination would tend to defer to the agency’s determination, unless “clearly erroneous”. Examples of “best interest” on the clearly erroneous list include § 5212(g), dealing with bid security, and § 5235, dealing with election of contract types)

Similar to “best” interest is “substantial” interest. A bid protest imposes an automatic stay of a solicitation. The stay can be lifted by following certain procedure, including the making of a written determination that lifting the stay is necessary “to protect substantial interests of the Territory”. “Substantial” would not seem to be the same as “best”.

In GCIF’s protest of the JFK High School solicitation, the Public Auditor did not question the detailed determination of substantial interest in that case (but ruled the stay was not necessary in the circumstances). It might be noted that the determination of substantial interest in this instance is also not one of the determinations to be reviewed by the “clearly erroneous” standards identified in § 5425.

The best interest of the Territory is not simply in the eye of the beholder. It is a determination, first of all, and determinations must be objectively based in fact and reason. The absence of articulable fact and reason is evidence that a declaration of best interest is subjective, arbitrary and capricious.

Moreover, whenever weighing the “best” interests of the Territory, it always important to remember that the principles and purposes of the Procurement Act are themselves also important interests of the Territory to be considered. Those principles include properly planned procurement, providing safeguards for a procurement system of quality and integrity, and providing for increased public confidence in the procedures followed by public procurement.

Whatever exigent circumstance may be put forward as a “best interest of the Territory”, it had better be more ”best” than those principles. Too often, close scrutiny will show a “best interest of the Territory” to be the best interest of an agency official or other interested party.

Monday, January 16, 2012

Disregard of procurement law costs money: New Jersey and Tanzania

Gov. Christie orders complete review of N.J. purchasing laws, public contracting processes
New Jersey Gov. Chris Christie has ordered a complete review of state purchasing laws and the public contracting processes, prompted by a report that showed one in five multimillion dollar purchases made by governments in New Jersey broke the law.

In the highest bracket of contracts, each worth $10 million annually or more, one in three broke the laws designed to make governments pick the fairest bids when spending taxpayer funds.

Prompted by The Record and Herald News report, Christie instructed the state treasurer to review how the state buys goods and services, find ways to eliminate accidental errors and prevent bid-rigging.

"You have to react to it," Christie said.

"I think part of it is that we have so much government," he said, referring to the hundreds of towns, agencies and authorities each purchasing goods and services. "We don't have enough people who are expert in this to do it the right way."

"I think a lot of it is negligence and not corruption. Some of it is corruption, but I think even more of it is negligence," he said.

The governor said he believed voters cared about contract fraud once they understand how it wastes revenues that would otherwise be spent to improve local conditions.

"It can be a very important issue if it becomes symbolic of people's frustration with government's inattentiveness, ineffectiveness," he said
.
Tanzania: Procurement Procedures Need a Touch of Professionalism
The latest move is a result of the audits conducted in 106 procument entities in the fiscal year of 2009/2010, of which 36 of them are MDAs, 51 are Public Authorities and 19 are Local Government Authorities (LGAs). The summons come hardly a month after Prime Minister Mizengo Pinda warned local government authorities and other public institutions engaged in procurement malpractices.

The Premier said the government will clamp down on malpractices found rampant in procurement and supplies departments adding that officials in those areas should be warned. He said that a recent procurement audit focusing on 174 procurement entities in ministries, regions, independent departments and agencies revealed that the level of compliance to the Public Procurement Act, 2004 was low, and only 68 per cent of them were given a clean bill of health.

He told them that 39 entities scored over 80 per cent, 115 scored between 50 and 80 per cent while 20 of them did not make it to 50 per cent. He said the areas where the entities performed poorly were procurement planning, establishment of a procurement monitoring unit, quality assurance, contract management as well as the publication of awards. "The report which also included value for money audits in 136 construction projects including 81 road projects, 33 building projects, 13 irrigation projects and seven bridge projects revealed that only 61 projects, representing 44.9 per cent, were implemented in adherence to the Law," he said.

He cited dubious transactions in some procurement entities where a total of 238.84 million shillings was paid for non-existing projects in Bahi, Geita, Magu, Mvomero and Sengerema. Mr Pinda said the Controller and Auditor General's reports on the other hand had unearthed huge losses the government incurs year after year through procurement.

Premier Pinda said the consequences of inefficiency and malpractices in procurement and materials management results into unnecessary government expenditure.

Sunday, January 15, 2012

Best value vs. Best intetersts

Sandeep Verma has published another very useful discussion of procurement principles in the Indian Business Standard. In the article below, he distinguishes the concepts of "Competitive Negotiation" and "Competitive Dialogue". Indeed, as he points out, these are not abstract concepts but policy frameworks for, respectively, US federal procurement procedure and European Union procurement procedure.

Competitive negotiations in government procurement
Competitive Negotiations are practiced extensively in the United States covering almost 80-90% of its Federal procurement dollars, and provide for simultaneous one-to-one discussions between contracting officers—COs—and individual bidders/ offerors.

Bidders are allowed to make repeatedly improved offers, both technical and commercial, in as many rounds of negotiations as may be determined by the CO to be appropriate. These discussions eventually culminate in inviting Best and Final Offers (BAFOs) from all offerors in the last round, and the CO evaluates all BAFOs on a 2-axis matrix of price and quality, making subjective assessments such as “unacceptable quality”, “satisfactory price”, “excellent quality”, “poor on price”, etc.

In addition, the US Federal Acquisition Regulation allows a CO to accept the initial responsive offers for the purposes of bid comparison, without holding any negotiations at all: an option many COs exercise so as to avoid the practical risk of inadvertently holding unequal discussions with competing offerors—a situation that can seriously jeopardise the successful award of a procurement contract should a dissatisfied bidder challenge contract-award on grounds of unequal discussions.

A contract is awarded to a party whose offer is determined by the CO as representing Best Value for Money for the US Government; and this again is a subjective decision, without the CO being required to compute an objectively-weighted comparison based on price and quality assessments of competing offers.

These new, private sector-like methods of public procurement were introduced in the US in the 1990s under the leadership of academician-administrators Steve Kelman and Steven Schooner.
The system places a great degree of trust on COs who are barred from revealing details of one bidder’s technical or commercial offers to its competitors during various rounds of discussions; and this trust is effectively supplemented by strong law enforcement with respect to maintaining integrity of the procurement process.

On the other hand, Competitive Dialogue is a method of procurement practiced in the EU in the award of complex contracts, typically in cases where the Government lacks the capabilities to arrive at all technical and commercial/ legal details of procurement on its own at the start of the procurement process.

Extensive techno-commercial discussions are conducted with short-listed potential bidders, who are then all called upon to make responses to a RFP that evolves during these discussions.

In effect, it resembles a simplified version of Competitive Negotiations, and appears to be driven by EU’s core vision of an integrated European market, constrained as it is by the high degree of possible subjectivity in a fully-blown competitive negotiations method that could be abused by procuring entities to cherry-pick their own domestic bidders, leaving bidders from other EU member-states as hapless spectators in the procurement process.

The prime advantage in using these modern methods of procurement is their utility in achieving Best Value for Money for the Government through simultaneous negotiations, but use of these procedures requires that risks of unequal discussions and unauthorised transmission of bid information by COs are effectively contained through strong enforcement and contractual oversight.

It seems fair to surmise that both procuring entities and competing bidders may need to exercise a great degree of vigilance over inadvertent or deliberate miscarriage of bid information or unequal discussions under the new procurement procedures [proposed in India].

As Mr. Verma suggests, the very intrinsic subjectivity of the selection process in the "negotiation" or "dialogue" procedure presents a situation where the very appearance of prejudice is inescapable. Given the ever-present headline story of one and another bidding gone awry, it does little to shore up public confidence in government if there is any hint of hanky-panky in the selection process. Thus, it must be handled very carefully.

There are two foundations upon which such a system must rest. First, there must be a trained and professional (independent minded) procurement staff. Second, there must be a critical review process. It is one thing to give judicial review deference to procurement staff when they are well trained and independent of political and commercial influence, and when the selection criteria are objectively verifiable, and another to give such deference, thereby turning a purposefully blind eye, to subjective decisions easily masking favor or fortune or laxity.

I'd suggest as one prong to any determination of "best value", that there be a separate determination of how the selection is in the "best interests" of the government. Too often, I'd suggest, the evaluation of best value is made in the blinkered context of the particular solicitation, without taking into consideration the broader interests of the government in fostering competition, broadening the industrial base that the government depends on, or other such interests.

I am not suggesting that such interests dominate the selection process, but by at least having a nod in that direction might uncover the instances where, for instance, incumbency is intrenched or commercial interests of the vendors preferred.

Saturday, January 14, 2012

Lost and Found: Responsibility

Anyone who has experienced any home renovation has known the tension that comes from trying to find a responsible contractor and tradespeople. Persons they can trust to show up when they should, stick to the plans and budget, provide sound advice about changes to increase effectiveness and decrease costs, and leave you with exactly what you asked for, or better, broom clean, on time and no surprises.

And that would be a walk in the park when compared to major contracting problems daily confronted by procurement and other acquisition personnel.

It is likely, no matter how satisfied with the overall result, there is always some little, or large, snag that sticks with you: yes, the contractor was good enough but....

And just because you've found a good contractor for your kitchen cabinetry does not mean that the contractor will be right for a bedroom extension; or that, since they did a good job this time that they will do a good job next time, when weather, staffing or time constraints provide different obstacles for the contractor to surmount.

An assessment of contractor responsibility is a broad concept, averaged over many experiences. It is certainly no guaranty of perfect performance in any future or other circumstance. It is an assessment more easily conducted in hindsight, but one that must be made in advance of performance whenever a new job comes along.

In the procurement context, the assessment of responsibility seeks to answer the question, does this proposed contractor have the integrity, the reliability, and the capability to do this particular job that I need to have done?

In the procurement context, the assessment of responsibility is as fundamental a precondition to contracting as is the analysis of the contractor's proposal for doing the work according to your needs and specifications. It is as fundamental a precondition, but one confronted in a different time and manner than the framework for determining if the bid or proposal is acceptable. (Matters of responsibility and responsiveness are very often, and mistakenly, conflated. See this prior post on that subject.)

In the procurement context, the procuring officials are generally, and to an extent necessarily, given the benefit of the doubt when making determinations that require a large or small degree of subjective judgment, but they are given very little discretion to judge matters that have specific, objective criteria or specification.

The following US Court of Federal Claims case serves as discussion for some of these observations. The protester, Akal Security, Inc., alleged the government (here, the United States Marshals Service (“USMS”) for the Fourth US Judicial Circuit), wrongly awarded a contract for court security services to another contractor, "Walden".

Although the Court's synopsis of the case says it was a "bid" protest, it arises from an Request for Proposals (RFP), so the award was not determined by the lowest bid, but rather by an evaluation of proposals submitted, compared to the specifications of the RFP, on a "best value" basis. (See this prior post.)

There were several other issues in the case, but I will focus on the responsibility issue here.

Akal Security, Inc., vs US, case No. 11-562C, filed December 29, 2011
(http://www.uscfc.uscourts.gov/sites/default/files/BRADEN.AKAL122911.pdf)
[Akal's complaint said the award should not have been made to Warden because, it was alleged:] USMS’s determination that Walden was a responsible contractor was arbitrary, capricious and an abuse of discretion; USMS’s responsibility determination for Walden violated FAR 9.104-1 and Section L-15 of the solicitation, because Walden failed to disclose the DOL Investigation; and USMS’s evaluation of Akal’s and Walden’s “Corporate Experience” was arbitrary, capricious, and an abuse of discretion.

Akal argues that “[t]here is no evidence in the Administrative Record that the SSA (source selection authority) exercised his independent judgment for awarding the Fourth Circuit Contract to Walden,” as required by FAR 15.308. Although the SSA can rely on the analysis contained in the CO Award Recommendation, the SSA must “review the agency’s evaluations . . . ensure their accuracy, compare the results, and then form his or her independent conclusion . . . .” Computer Sciences Corp. v. United States, 51 Fed. Cl. 297, 320 (2002). Instead, the SSA simply signed his name next to the word “Approved” on the CO Award Recommendation. There is no evidence in the Administrative Record that the SSA did anything more than sign the CO Award Recommendation, violating FAR 15.308.

[The Court held] FAR 15.308 has two relevant requirements: 1) the SSA must use his or her independent judgment in making a source selection and 2) the source selection decision must be documented, including the rationale for any business judgments and tradeoffs made or relied on by the SSA. FAR 15.308, however, does not require that a separate document be written by the SSA indicating the rationale, only that the documentation include any rationales “made or relied on by the SSA . . . .” Id. (emphasis added); see also Computer Sciences, 51 Fed. Cl. at 320 (“[A]ll the SSA is required to do is review the agency’s evaluations of past performance, ensure their accuracy, compare the results, and then form his or her independent conclusion based on this information.”); Latecoere Int’l, Inc., B-239113, B-239113.3, 92-1 CPD ¶ 70, 1992 WL 15029 at *6 (Comp. Gen. Jan. 15, 1992) (“[T]here is no legal requirement that an SSA personally write the document that reflects the award selection decision.”)

In this case, the SSA approved the CO Award Recommendation that included a 10-page memorandum and the enclosed TEB Final Report, both of which document “the rationale[s] for any business judgments and tradeoffs made.” See generally AR Tab 65. The SSA did not author a separate document, but adopted the rationales of those documents by signing his name next to the word “Approved.”

This situation is not comparable to Information Sciences Corp. v. United States, 73 Fed. Cl. 70 (2006), wherein the SSA unilaterally changed the ratings of the offerors and made an award selection different than that of the CO’s recommendation, without any explanation of why he elected to adopt a dissenting minority report. Id. at 119-21. The key difference between the two cases is that in Information Sciences, there was no documentation of “the business judgments . . . made . . . by the SSA.” FAR 15.308 (emphasis added).

In this case, there was documentation of “the business judgments . . . relied on by the SSA.” Id. Therefore, additional documentation would be redundant. See RALPH C. NASH & JOHN CIBINIC, The Source Selection Decision: Who Makes It?, 16 No. 5 NASH & CIBINIC REP. ¶ 25 (2002) (“[I]n the great majority of procurements, we believe the source selection decision is a team decision, and we further believe that is as it should be. . . . [In a situation where there are conflicting recommendations from team members], the job of the SSA is to reconcile the conflicts. If the SSA encounters that rare instance where they cannot be reconciled, the SSA should reach a full understanding of the reason for the conflicts and make a source selection decision based on the best reasoned recommendation.”)

[Akal claimed] the RFP required the CO (contracting officer) to make a responsibility determination pursuant to the criteria set forth in FAR 9.104-1 and 9.104-2, and the Special Standards of Responsibility, as set forth in the RFP. In particular, the Special Standards of Responsibility require that offerors disclose “any threatened, pending or current litigation. Moreover, without “information clearly indicating that the prospective contractor is responsible, the [CO] will make a determination of non-responsibility.”

[The Court held] FAR 9.105-1(a) requires the CO to “possess or obtain information sufficient to be satisfied that a prospective contractor currently meets the applicable [responsibility] standards . . . .” 48 C.F.R. § 9.105-1(a). The United States Court of Appeals for the Federal Circuit, however, has determined that “the contracting officer is the arbiter of what, and how much, information he needs.” John C. Grimburg Co. v. United States, 185 F.3d 1297, 1303 (Fed. Cir. 1999); see also Bilfinger Berger AG Sede Secondaria Italiana, B-402496, 2010 CPD ¶ 125, 2010 WL 2581928 at *4 (Comp. Gen. May 13, 2010) (“Contracting officers generally are entitled to rely on information available to them at the time of a responsibility determination, absent any indication that the information is defective, unsupported, or suspect.”); cf. Sw. Bell Tel. Co., B-292476, 2003 CPD ¶ 177, 2003 WL 22380947 (Comp. Gen. Oct. 1, 2003) (requiring the Air Force to make a new responsibility determination where the CO was aware of allegations of impropriety against winning bidder, but “simply assumed” that the responsibility requirement was met).

Thus, it was within the discretion of the CO to determine whether to request information on “threatened, pending, or current litigation” in the first place. Further, although failure to provide requested information may be a basis for a non-responsibility determination, it need not be, given the discretion afforded the CO. See Consortium HSG, B-292699.6, 2004 CPD ¶ 134, 2004 WL 1432862 at *4 (Comp. Gen. June 24, 2004) (“Without a showing that the CO unreasonably failed to consider available information, [the GAO] will not consider a protest challenging the CO’s affirmative responsibility determination.”).

It appears likely that disclosure of the DOL investigation would not have changed this finding. Moreover, Walden disclosed the related Bonner litigation. Thus, the facts underlying the DOL investigation and their effect on the responsibility determination were known and considered by the CO. Finally, the contract award in this case was approximately $164 million, so the effect of the DOL investigation on Walden’s financial capability to perform the contract likely would be minimal.

For these reasons, the court has determined that the CO’s responsibility determination as to Walden was not arbitrary, capricious, irrational, nor a violation of law. See Bender Shipbuilding & Repair Co. v. United States, 297 F.3d 1358, 1362 (Fed. Cir. 2002) (stating that responsibility determinations are “largely a matter of judgment” and thus “are normally entitled to considerable discretion and deference,” as long as a decision has “a rational basis and [is] supported by the record . . . .”)

If you select the tag above, Determining Responsibility, you will find many other posts discussing that matter in other contexts and detail. The points I want to make here are:

First, under the ABA Model Code, and Guam law, there is no requirement for a written or other record of determination that a bidder or offeror is responsible. All that is required is that, before award, the procurement officer must be satisfied that the bidder/offeror is responsible. (2 GAR § 3116(b)(4).)

In stark contrast, if the bidder/offeror is determined not to be responsible in the particular solicitation, the procurement officer must make a determination of non-responsibility. (2 GAR § 3116(b)(5).)

Second, as the case above illustrates, reviews of the procuring agency determinations in the US federal system are judged based on the deferential "arbitrary, capricious, or abuse of discretion" standard. This is based both on established case law and, more to the point, statutory requirement.

In high contrast, on administrative appeal of a protest matter to the Office of Public Auditor in Guam, the standard of review is on independent "de novo" basis (5 GCA § 5703.). And, her determination is, on appeal to the Superior Court, entitled to "great weight and the benefit of reasonable doubt". (5 GCA § 5704.) [Note that on a direct appeal to the Superior Court of an agency protest, not by way of the OPA, the determination of non-responsibility is judged by the clearly erroneous, arbitrary or capricious standard; 5 GCA § 5245.]

Wednesday, January 11, 2012

Include before and after pictures in procurement photo album

Unfortunately, news headlines, and political knee jerk responses to them, too often frame the perspective of the job of procurement. The blinkered view of procurement (see, e.g., this post) only sees the combative arena of solicitation and award.

There is much more procurement work, more critical work in many ways, that comes before and after the solicitation. The public may not know that, but the procurement managers do, as the following article illustrates.

Acquisition workforce, contract management top CAO priorities
Improving contract management and workforce development and training are the most important areas federal chief acquisition officers and senior procurement executives are focusing on in 2012.

An anonymous email survey of CAOs and SPEs by Federal News Radio found 85 percent of the respondents said they believe a better trained workforce is the best tool to reduce contracts spending and save money.

Many of the priorities survey respondents highlighted closely follow those outlined by the Office of Federal Procurement Policy over the last three years.

Dan Gordon, who just retired from OFPP Dec. 31 and now is associate dean of the George Washington University law school in Washington, said, "we didn't focus enough on what comes before and what comes after [figuring out "who should get the contract]."
The article is full of interesting, and sometimes surprising or provoking, comments elicited by the survey. You would find it an interesting read.

Sunday, January 8, 2012

Righting specifications

A news source from Orangeburg County, South Carolina USA, has reported on a procurement controversy there, forming the basis for discussion in this post.

I have no knowledge of the content of the County's procurement law, but it has come under critique in circumstances
similar to cases seen on Guam, and elsewhere, where the real issue was not the content of the law but the failure of the procurement officials to follow the law, or perhaps, even being informed about it.

The controversy involved the acquisition of safety and communications equipment, such as light bars, sirens and vehicle camera systems to outfit 20 new County police vehicles. The County Council accepted the Sheriff's Office recommendation to accept the low bid of $112,004.60 by an out of town supplier, $2,000 under the local supplier's bid. It has a subplot about preference for local vendors. You need to read the whole story for the context.

Councilmen question county's procurement code

"The more I learn about the code we passed, the more flaws I see," Councilmen Clyde Livingston said. "It is obvious to me that the bid specifications were so tight that there was only one company in the state of South Carolina that could bid on it.

"I think it reflects poorly on the county in putting together the procurement code that a gap like this exists."

Sheriff's Office Capt. Butch Farnum told council Light-N-Up has the same type of equipment currently found in the agency's existing vehicles. He noted the Roebuck-based company has been the primary vehicle equipment vendor since before 2007.

"The only criteria I was aware of was to put the specs out according to the equipment we needed," Farnum said. "The sheriff elected to determine we should keep uniformity in our equipment to become an accredited law enforcement agency. That was a factor for me to put this all together.

"The second bidder (Kelley) had two exceptions to the specifications we asked for."

Under the ABA Model Procurement Code for states and municipalities, which forms the basis for the Guam procurement law, it is a fundamental principle that the government must "foster" competition. Where specifications funnel awards to a particular contractor or supply or service, they fail that essential undertaking.

The Code, and Guam law, reiterate that principle in requiring that specifications be written to "encourage competition" and "not be unduly restrictive". It also has severe limitations on use of sole sourcing, brand name specifications, and use of "brand name or equal" specifications, all requiring written determinations in justification of the particular need. Any violation of those edicts is ground to protest the solicitation.

"Uniformity", or conformity, or compatibility with existing equipment can be legitimate parameters when assessing need and writing specifications. But the danger in the anti-competitive aspect of that criteria, and the suggestion of favoritism it raises, requires that any such requirement be critically and objectively assessed. Without that critical assessment, we might still be equipping police with ponies and flintlock pistols.

One easy way, when dealing with procurement of supplies, to cast doubt on the legitimacy of any such claim is to consider if the supplies sought are standard common items of equipment. It is much harder to justify the need for a particular standard piece of equipment than it is to justify the need for a bespoke item (and even bespoke items should be questioned for particular needs).

The Guam and ABA regulations declare the express policy "to procure standard commercial products whenever practicable", and "unique requirements shall be avoided". They require that specifications not specify a product having features which are peculiar to the products of one manufacturer without a justifying written determination.


In many standard commercial products, there are industry standards that can be identified from third party rating or testing sources. These standards should be the guiding light for such specifications, not the proprietary specifications of one particular supplier or manufacturer.

The ABA regulations implementing the Model Code speak extensively to this subject, as do
the Guam regulations. The topic of specifications is taken up in Chapter XIV of the Guam Procurement Process Primer, which is available freely, as noted in the righthand sidebar.

I'd think that if Guam can get its regulations right on the obligations of specification writers, it would be a simple matter for a county in South Carolina to do the same.

Tuesday, January 3, 2012

Taking task orders to task

This post excerpts the gist of an informative "client alert" prepared by the US-based Pillsbury law firm. Please take the link to the full article if this is of interest to you.

For Now, Federal Contractors May Protest Any Civilian Agency Task/Delivery Order at GAO
Authors: Daniel S. Herzfeld, Jack Y. Chu
6/16/2011
Contractors may now protest any civilian agency task or delivery order under indefinite delivery/indefinite quantity ("IDIQ") contracts, the U.S. Government Accountability Office ("GAO") ruled on June 14 in denying an agency's request to dismiss the Technatomy Corporation protest. This ruling is important because GAO's limited statutory authority to hear protests of civilian task or delivery orders exceeding $10 million was viewed by many experts as having expired on May 27 without reauthorization from Congress.1

GAO's decision now begs three questions:

(1) Will Congress act quickly to re-institute the same $10 million protest limitation on civilian agencies that still applies to defense agencies?
(2) Will the U.S. Court of Federal Claims agree with GAO's analysis?
(3) Will the Executive branch honor GAO's unexpected opinion?

Until recent years, the Federal Acquisition Streamlining Act of 1994 ("FASA") had limited the GAO's authority over protests of task and delivery orders under IDIQ contracts only to cases in which the protest alleged that the order increased the scope, period, or maximum value of the contract under which the order was issued.2 Then, following enactment of the National Defense Authorization Act ("NDAA") for Fiscal Year 2008, GAO gained the limited authority to review task or delivery orders exceeding $10 million for both Department of Defense and civilian agency contracts. Congress placed a three-year sunset provision on such authority (i.e., a May 27, 2011 expiration date), in order to assess the impact of the protests on the federal procurement system before deciding whether to extend (or let expire) the authority.

Earlier this year, the enactment of the NDAA for Fiscal Year 2011 extended through September 30, 2016 GAO's supplemental authority over Department of Defense task and delivery order procurements exceeding $10 million. Notably, this legislation amended only Title 10 of the U.S. Code (covering military procurements) but not Title 41 (covering civilian agency procurements).

In Technatomy Corporation, the GAO interpreted the 2008 NDAA as having amended FASA such that the three-year sunset provision applied to the entire statutory subsection – 41 U.S.C. § 253j(e)3 – granting GAO the exclusive, but limited protest authority over civilian agency task and delivery orders exceeding $10 million. Following the sunset of this provision on May 27, the GAO concluded that its authority over task and delivery order protests was no longer statutorily limited, but instead "reverted" to its broader authority prior to FASA – during which the scope of GAO's authority to hear protests under the Competition in Contracting Act did not distinguish between protests of contracts and protests of task and delivery orders. Thus, GAO concluded in Technatomy Corporation that the sunset of the statutory provision "eliminates any bar to our jurisdiction to hear and issue decisions concerning bid protests arising from task or delivery orders of any value."

Of Strategic Sourcing or Added Value: same same

On a small (eight by thirty miles) island isolated by thousands of miles of sea and ocean (see Distances), as Guam is, economies of scale can easily become skewed. All it takes is one large "box" store and local mom and pops mainstays are swept away like being hit by a super-typhoon.

Still, if managed well, wise government purchasing supervision can whittle down the costs of government, and since we are leveraged to the hilt with debt, that can be a good thing.

The US federal government is taking that step, albeit pushing the string, to usher in more "strategic sourcing".

Strategic Sourcing: GSA’s Path of Choice
Although the federal government will increase the importance of price when awarding contracts for goods and services in an upcoming era of tightened budgets, the government’s lead agency for acquiring resources sees this new era as a “sweet spot” for it to get agencies good value for their purchases according to Federal Acquisition Service Commissioner Steven Kempf.

Kempf told Government Executive he believes the General Services Administration is well-positioned to help federal agencies leverage their resources and help reduce costs when purchasing goods and services. The GSA is using strategic sourcing as its tool to cut costs ....

The Office of Federal Procurement Policy introduced strategic sourcing in 2005 to encourage multiple agencies to purchase office supplies and other products on one contract vehicle in an effort to cut costs. The Federal Strategic Sourcing Initiative intends to increase collaboration between the private and public sectors in developing solutions and sharing best practices.

While the Government Accountability Office has questioned GSA’s methods for measuring the savings, GAO said in a December report that interagency purchases cut the government’s spending on printing products when purchases were made on GSA’s multiple award schedule program.

There has been movement on several fronts in Washington to further encourage strategic sourcing. In September, the OFPP directed agencies to develop business cases for establishing or renewing either a governmentwide, multiagency or interagency contract.

OFPP said this measure would prevent duplication of contracts and former OFPP Administrator Dan Gordon said the measure would help agencies better determine if their needs require a new contract or if needs could be met using an existing contract.

There are still some obstacles in GSA’s path for governmentwide contracts. According to GovExec’s list of agencies participating in the strategic sourcing initiative, 90 federal entities use GSA’s domestic shipping and delivery services and 60 use GSA’s office supplies plan.

“Over the last 10 years, agencies received more sources and had more in-house capability to do things, so they got used to it,” Kempf said, adding that agency pride may explain the hesitancy.

That article and topic have been picked up across the Pond.

Federal Procurement: Strategic Sourcing/Leveraged Buying/Multiple Award Schedules Required (Part 1)
Here at Spend Matters, we know a number of folks in public sector procurement who are extremely dedicated to improving government-related acquisition activity in both the US and UK. Yet the yardstick by which we measure public sector activity must be more transparent.

It's not enough to reduce spending (and budgets) overall or better manage demand (i.e., cut off spending before it happens), however important these two items are. It's also essential to enable civil servants to buy smartly at the frontlines of government, taking advantage of centralized agreements that leveraged, volume buying power and overall spend clout can provide.

Simply put, clout in procurement -- at least in large part -- is about enabling suppliers to better leverage a relationship and forcing a discount, accordingly. Theoretically, everyone wins in a leveraged purchasing arrangement. Procurement organizations can claim victory through negotiated discounts and consolidated supplier relationship that can improve quality and responsiveness. And suppliers benefit from receiving a larger portion of the spend pie.

Yes, theoretically. It begins to break down in practice when government habituates to simply shopping at WalMart and Amazon, however. It is the process of habituated shopping from the same supplier, big or small, that leads to inefficiencies, in my view.

Whenever we see supply contracts last 5 years, and so often then renewed, that theory gives way to foible. Especially in the case of routine, standard products, more frequent trips to the market, with new solicitation, keep the market interested, and sharp.

The notion of "strategic sourcing", has also taken hold on this side of the Pacific. The Public Auditor of Guam has just issued a report on GovGuam small purchasing practices, and takes essentially the same path discussed above as is being promoted in Washington and touted in London. She is calling the process "added value", but it's the same worthy idea.

The report is called, "General Services Agency Small Purchases Procurement Follow-Up Audit Report No. 11-12, December 2011".

The Executive Summary describes the GovGuam situation.
The Government of Guam GovGuam) has tremendous buying power, yet does not take full advantage of its bargaining potential. Rather than consolidate similar procurement requests, especially for recurring supplies and services, and buying in bulk, the General Services Agency (GSA), GovGuam's procurement arm, increasingly uses small purchase procurement. According to GSA's Chief Procurement Officer (CPO), agencies are ultimately responsible for planning their purchases and GSA simply processes requisitions as long as they are within the dollar threshold of the corresponding procurement authority.

GSA’s failure to plan purchasing for line agencies and consolidate procurement of recurring items led to artificially dividing and/or not consolidating purchases totaling $3.1M that should have been procured through competitive sealed bids.

GSA routinely issues small purchase POs on behalf of all line agencies for recurring items, circumventing the competitive sealed bidding process which requires advertisement. The departments of Public Health and Social Services (DPHSS) and Public Works (DPW) are consistently the two highest users of small purchase procurement, issuing the most POs every fiscal year.

Small purchase procurement is piecemeal, uncomplicated, and convenient, limits competition, stifles fairness, is inherently inefficient and costly, and does not require advertisement. In requiring only three price quotes from vendors, small purchase procurement closes the doors to those vendors, not selected who may offer better products, services and/or prices. GSA routinely decides and not the agencies which three vendors to solicit quotes from. This adds further to the speculation of “who you know” in government in order to do business. Small purchase procurement leaves the wider vendor market untapped.

The fundamental objective of government procurement is to provide departments and agencies with the goods and services they need to carry out their duties to the public efficiently and effectively. Those goods and services must be of the right quality and quantity at the lowest overall cost, and delivered and available on a timely basis. To these ends, the procurement process should involve as much competition as possible, to ensure that the opportunity to compete is open and fair to all who choose to do business with their government. Small Purchase limits competition to only the select or preferred three vendors.

She concludes, rhetorically,
What value added does GSA provide, if it merely processes individual POs from individual agencies?

Score. Adding value is too often an alien concept when purchasing, as in other management endeavor, is subsumed to paper pushing and territoriality.